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Trust, Leniency and Deterrence

Author

Listed:
  • Bigoni, Maria

    () (University of Bologna)

  • Fridolfsson, Sven-Olof

    () (The Swedish Competition authority (Konkurrensverket), Research Institute of Industrial Economics (IFN))

  • Le Coq, Chloé

    () (Stockholm School of Economics, SITE)

  • Spagnolo, Giancarlo

    () (Tor Vergata University, Stockholm School of Economics, SITE, and CEPR)

Abstract

This paper presents results from a laboratory experiment studying the channels through which di erent law enforcement strategies deter cartel formation. With leniency policies o ering immunity to the rst reporting party, a high ne is the main determinant of deterrence, having a strong e ect even when the probability of exogenous detection is zero. Deterrence appears to be mainly driven by `distrust'; here, the fear of partners deviating and reporting. Absent leniency, the probability of detection and the expected ne matter more, and low nes are exploited to punish defections. The results appear relevant to several other forms of crimes that share cartels' strategic features, including corruption and nancial fraud.

Suggested Citation

  • Bigoni, Maria & Fridolfsson, Sven-Olof & Le Coq, Chloé & Spagnolo, Giancarlo, 2014. "Trust, Leniency and Deterrence," Konkurrensverket Working Paper Series in Law and Economics 2014:2, Konkurrensverket (Swedish Competition Authority).
    • Handle: RePEc:hhs:kkveco:2014_002
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    References listed on IDEAS

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    Citations

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    as


    Cited by:

    1. Jeffrey V. Butler & Danila Serra & Giancarlo Spagnolo, 2017. "Motivating Whistleblowers," Departmental Working Papers 1701, Southern Methodist University, Department of Economics.
    2. Joseph E. Harrington, Jr., 2011. "Corporate Leniency with Private Information: The Push of Prosecution and the Pull of Pre-emption," Economics Working Paper Archive 573, The Johns Hopkins University,Department of Economics.
    3. Maria Perrotta Berlin & Bei Qin & Giancarlo Spagnolo, 2018. "Leniency, Asymmetric Punishment and Corruption: Evidence from China," CEIS Research Paper 431, Tor Vergata University, CEIS, revised 23 Apr 2018.
    4. repec:eee:trapol:v:63:y:2018:i:c:p:80-89 is not listed on IDEAS
    5. Harrington, Joseph E. & Hernan Gonzalez, Roberto & Kujal, Praveen, 2016. "The relative efficacy of price announcements and express communication for collusion: Experimental findings," Journal of Economic Behavior & Organization, Elsevier, vol. 128(C), pages 251-264.
    6. Giovanni Immordino & Gülen Karakoç-Palminteri & Salvatore Piccolo & Paolo Roberti, 2018. "Optimal Leniency and the Organization Design of Group Delinquency," CSEF Working Papers 503, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
    7. repec:kap:revind:v:52:y:2018:i:3:d:10.1007_s11151-017-9586-8 is not listed on IDEAS
    8. repec:kap:decono:v:166:y:2018:i:1:d:10.1007_s10645-017-9309-4 is not listed on IDEAS
    9. Carsten J. Crede & Liang Lu, 2016. "The effects of endogenous enforcement on strategic uncertainty and cartel deterrence," Working Paper series, University of East Anglia, Centre for Behavioural and Experimental Social Science (CBESS) 16-08, School of Economics, University of East Anglia, Norwich, UK..
    10. Sascha Behnk & Iván Barreda-Tarrazona & Aurora García-Gallego, 2012. "Reducing deception through subsequent transparency - An experimental investigation," Working Papers 2012/14, Economics Department, Universitat Jaume I, Castellón (Spain).

    More about this item

    Keywords

    Antitrust; Betrayal; Cartels; Collusion; Distrust; Fines; Leniency; Whistleblowers;

    JEL classification:

    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices

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